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Thursday, January 22, 2009

Apple Earnings Highlights

Well, I was fairly close on my predictions for Mac units while iPods were stronger and iPhones were weaker. The star of Apple's report though is their gross margins. They hit an absolute home run with GM's of 34.7% versus 30-31% guidance. This was in a quarter where there were significant price cuts on the iPod Touch and the entire notebook line was revamped with increased features. It was quite a performance.

The two most important product highlights from the call were the comments on the possibility of a stripped down iPhone and a netbook. I had believed that Jobs had already squashed any possibility of such a device during the last call but that didnt stop speculation on the gadget sides. This time, Cook removed all doubt. Apple wont play in the voice only side of the handset business. He also stated commented on that Apple's entire approach was different from the rest of the industry as they see the iPhone as a software platform. I think this confirms the fact that Apple will do everything in their power to keep application development for the iPhone a single step process. This precludes multiple screen sizes and different input methods. We may see multiple versions of the iPhone but they'll all be based of the same basic hardware. First though, Apple needs to cut prices on the current iPhone. The December quarter saw a slowdown in sales which means the seasonally slow March quarter will see sales fall even more steeply. A price cut to $99 would reignite sales and allow Apple to clear out inventory ahead of the iPhone 3.0.

As for Netbooks, I think Apple has given sufficient hints to expect such a device later this year. Like the iPhone, once Apple acknowledges having ideas on the device, it is likely fairly far along in the development process.